Advocate contends IRS does poor job on identity theft

Jan. 10, 2013 - 02:33PM
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The IRS has failed to provide swift and effective assistance to victims of identity theft even as the number of crimes continues to soar, according to a federal report issued Wednesday.

Although former IRS commissioner Douglas Shulman in 2008 vowed to create a “seamless” process to aid identity theft victims, the agency’s actual response falls short, according to the National Taxpayer Advocate’s annual report to Congress.

The issue focuses on IRS response to taxpayers whose identities — and tax refunds — are stolen by thieves who have gained access to the victims’ Social Security numbers and other identifying information.

“Victims who come to the IRS for assistance today will routinely need to speak with multiple employees and wait more than six months to have their issues resolved,” said the report by Nina Olson, whose agency aids taxpayers with IRS-related problems and issues.

Issues raised by the report — and challenged by the IRS — include:

 Instead of a centralized approach using its 4-year-old Identity Protection Specialized Unit, the IRS handles identity theft complaints in 21 different units, “many with their own rules and procedures.”

 Although the tax agency has created a special Identity Protection Personal Identification Number to guard against the problem, it does not cover all victims.

 The IRS Taxpayer Protection Unit, created to handle calls from filers whose tax returns were flagged for possible fraud, may not be sufficiently staffed to handle a high volume of victim calls.

The conclusions come amid a surge of tax-related identity theft.

In fiscal 2012, the report shows, the IRS Identity Protection Specialized Unit received 449,809 cases, up nearly 80 percent from the previous year. The Taxpayer Advocate Service headed by Olson reported a 60 percent jump in similar cases during the same period.

Olson’s report recommended that the IRS use the Identity Protection Specialized Unit as a centralized “traffic cop” that coordinates handling of all identity theft cases.

The IRS should issue identity protection identification numbers year round, as soon as the identities of the rightful Social Security number owners are determined, the report said.

The IRS said the issue is a top priority. “Although we cannot stop all identity theft, our efforts in filing season 2012 provide a solid foundation upon which we will continue to build and improve,” the IRS said.